annuity or mutual funds

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L1: annuity or mutual fundsBeing a newcomer I would like to thank all you folks that take the time to give advise tome who has been investing for some time but is new to my retirement 72t situation. I have contacted two financial planners. One has suggested putting all the money into a American Skandia Variable Annuity. The other suggests a John Hancock Variable annuity.I”m just not so sure if it is a situation where they make more money of selling me a particular annuityor if I would be better off sticking to mutual funds. The situation is as follows:
Wifehas just retired last week. She will turn 52 the middle of October. She will receive a total of $600,000.00 from her pension. We want to draw out as much as possible from the 72t, which I get conflictingamounts as to how much that would be. How would you folks approach the situation. Annuity or mutual fund? Fee only financial planner or full service planner? Thank you in advance.

Later Rick2006-09-26 08:03, By: Rick, IP: [69.210.248.161]

L2: annuity or mutual fundsHello Rick:
I would suggest that you need as many as three different professionals working for you: (1) a tax CPA/tax attorney to correctly design your SEPP plans; (2) a fee only financial advisor to look at your overall financial picture; (3) an investment advisor to help you make good decisions on investments to compliment the decisions you make with professionals (1) and (2). Professionals (1) & (2) can be the same person, but I do feel pretty stongly that (3) should be different. Lastly, I am biased against annuities as an investment class except for certain situations such as buying a SPIA to fund SEPP distributions for 5 – 10 years.
TheBadger
wjstecker@wispertel.net
2006-09-26 08:21, By: TheBadger, IP: [72.42.66.52]

L2: annuity or mutual fundsHi Rick:
With the amount of money your wife has, I would definitely avoid mutual funds and maybe Exchange Traded Funds (ETF)in favor of a Separately Managed Account (SMA) composed of individual stocks, bonds, etc. The SMA provides more control over investments and a whole lot more flexibility when changes are needed to account composition. SMA”s are fee-based accounts and can either be constructed and managed by your advisor, or you can access outside, professional money management teams through your advisor. Personally I have found that using the outside team is better for both the client and advisor simply because people can either “gather assets” or “manage assets” well, but not both. When interviewing advisors, look for the ones that use outside management teams rather than trying to convince you they are great money managers and will do the investment picking themselves.
The other option you have is using a Variable Annuity or two, and this can be aviable option also. VA”s provide benefits that non-VA investments cannot provide, and you do not have to “annuitize” to get these benefits. Traditionally you buy an annuity from the insurance company and they give you an income stream thatyou cannot outlive, but you lose control of the money.However, with new developments in living benefit riders to the VA, you can create a stream of income without annuitization and you do not lose control of the money. This particular rider is called a Guaranteed Minimum Withdrawal Benefit (GMWB), and most companies have it now. Different companieshave individualnames for this rider but they are all GMWB”s. Learn all you can about the VA and riders available to you.
Study both options I have described above and decide which best fits into you and your wife”s situation. Do you need the benefits offered by the VA or can you live with no benefits outside of a VA with a SMA? Keep an open mind in this decision. But most importantly, don”t get suckered into the argument that you are “paying twice for tax deferral” if you use the VA. Congress created “tax deferral” in insurance contracts before they created the IRA as a tax deferred vehicle, and if Congress created it then everyone gets to use it for free. You are paying for whatever benefits the VA will provide you in your individual situation. You will never find a charge listed in any prospectus for”tax deferral” because it doesn”t exist.
As to costs, you may be surprised to learn that both options can be pretty close to each other. The VA may be a little more, but you need to weigh these costs to what you are getting. Like I said earlier, if the VA costs are not worth it to you, then by all means don”t go this route. In the end, do what makes the best sense to you.
Hope this helps.
Jim2006-09-26 11:11, By: Jim, IP: [70.184.2.72]